Shatter wants banks to follow AIB's lead on debt forgiveness
JUSTICE Minister Alan Shatter has said he expects the country's banks to offer debt forgiveness to customers who are "under enormous financial stress" and whom he says "are in reality effectively insolvent".
Mr Shatter's call came in response to comments made by the head of AIB's Arrears Unit, Garry Stran, in which he revealed that the State-owned bank is now offering the possibility of debt forgiveness and capital write-off to distressed mortgage holders in cases where there is no realistic prospect of the entire debt being discharged.
Welcoming Mr Stran's comments, Mr Shatter said: "I expect other financial institutions to take an approach similar to that which AIB is committed."
Mr Shatter cautioned, however, that any arrangement for debt forgiveness could only apply to those whom "truly cannot pay as opposed to those who will not pay".
He stressed that there could not be "wholesale debt forgiveness".
"It is, however, of crucial importance that debt forgiveness be an option available and applied by financial institutions in dealing with the circumstances of individuals under enormous financial stress and who are in reality effectively insolvent," he said.
In the case of the AIB, Mr Stran told the Irish Examiner newspaper that up to 30 per cent of those who have had their mortgages restructured, and who are working with the bank, could yet see a portion of their debts written off.
Mr Stran said that while 70 per cent of borrowers who had seen their loans modified were now meeting their monthly repayments, there was a "rump" whose loans need to be restructured.
"Writing off debt where people are doing the very best they can is absolutely appropriate," Mr Stran said.
And while Mr Stran ruled out "wholesale debt forgiveness", a spokesman for Mabs (Money Advice and Budgeting Service) welcomed the bank's approach, describing it as "fresh and realistic".